Microsoft drops appeal of European antitrust sanctions

In a surprising move, Microsoft has decided not to appeal a December ruling by the European Union Court of First Instance requiring the software giant to immediately comply with the antitrust sanctions levied against it in March 2004. The sanctions required Microsoft to stop bundling Windows Media Player with Windows XP and to disclose information about its server software to rival companies.

"Microsoft has decided to forego its right to appeal the Court of First Instance's...ruling of December 22, 2004," it said in a statement. "Rather than seeking to suspend the Commission's remedies, Microsoft's focus now is on working constructively with the Commission on their full and prompt implementation."

While Microsoft is going along the imposition of the sanctions, the company is continuing its appeal of the original finding.

As a result of the decision, Microsoft will soon be shipping a version of Windows XP inside the European Union without Windows Media Player installed.

In its original arguments before the Court of First Instance, the company claimed it would suffer "irreparable harm" if forced to split its media player from the OS. The European Commission countered by saying any additional delay would give Microsoft "life or death" power over media formats.

Both positions are heavy with the hype. While creating a version of XP without Windows Media Player may be a nuisance for Microsoft, WMP will still be available as a free download once European users fire up their new PCs and discover that their machines lack the required software to play music and video. Disclosing some details about the workings of their server software may help some competitors out, but Microsoft's share of the market is not likely to decline.

A couple of years ago, the "life or death" statement may have carried more weight. However, with the emergence of iTunes Music Store in parts of the EU and resulting popularity of music encoded with Apple's FairPlay digital rights management format rather than WMA, the dominance of Windows Media Player (at least for music) is no longer a foregone conclusion. Sure, it can be argued that the sanctions will directly benefit EU consumers, but it will only do so by giving Microsoft's competitors — particularly RealNetworks — a helping hand. In the meantime, the original antitrust case will continue to wind its way through the lengthy (two- to five-year) appeals process.